Best Practices in Talent Management: Chapter 1

CHAPTER 1 AL RI AVON PRODUCTS, INC. TE MA MARC EFFRON D TE A leadership development and talent turnaround system designed for executives that leverage 360-degree feedback, a leadership skill/competency model, and indi- GH vidual development planning. ■ Introduction RI ■ A Success-Driven Challenge The Turnaround PY ■ ■ The Talent Challenge ■ Execute on the “What,” Differentiate with “How” CO ■ From Opaque to Transparent ■ The Avon 360 ■ Broad-Based Transparency ■ From Complex to Simple ■ Performance Management ■ Engagement Survey 1 2 Best Practices in Talent Management ■ From Egalitarian to Differentiated ■ Communication to Leadership Teams ■ A Few Big Bets ■ Tools and Processes ■ From Episodic to Disciplined ■ From Emotional to Factual ■ From Meaningless to Consequential ■ The Results of a Talent Turnaround ■ Measuring the Talent Turnaround’s Success INTRODUCTION In early 2006, Avon Products, Inc., a global consumer products company focused on the economic empowerment of women around the world, began the most radical restructuring process in its 120-year history. Driving this effort was the belief that Avon could sustain its historically strong financial performance while building the foundation for a larger, more globally integrated organization. The proposed changes would affect every aspect of the organization and would demand an approach to find- ing, building, and engaging talent that differed from anything tried before. A SUCCESS-DRIVEN CHALLENGE Avon Products is a 122-year-old company originally founded by David H. McConnell— a door-to-door book seller who distributed free samples of perfume as an incentive to his customers. He soon discovered that customers were more interested in samples of his rose oil perfumes than in his books and so, in 1886, he founded the California Perfume Company. Renamed Avon Products in 1939, the organization steadily grew to become a leader in the direct selling of cosmetics, fragrances, and skin care products. By 2005, Avon was an $8 billion company that had achieved a 10 percent cumula- tive annual growth rate (CAGR) in revenue and a 25 percent CAGR in operating profit from 2000 through 2004. A global company, Avon operated in more than forty coun- tries and received more than 70 percent of its earnings from outside the United States. By all typical financial metrics, Avon was a very successful company. However, as the company entered 2006 it found itself challenged by flattening revenues and declining operating profits. While the situation had many contributing causes, one underlying issue was that Avon had grown faster than portions of its infra- structure and talent could support. As with many growing organizations, the struc- tures, people, and processes that were right for a $5 billion company weren’t necessarily a good fit for a $10 billion company. Avon Products, Inc. 3 THE TURNAROUND Faced with these challenges, CEO Andrea Jung and her executive team launched a fundamental restructuring of the organization in January 2006. Some of the larger changes announced included: ■ Moving from a Regional to a Matrix Structure: Geographic regions that had operated with significant latitude were now matrixed with global business func- tions, including Marketing and Supply Chain. ■ Delayering: A systematic, six-month process was started to take the organization from fifteen layers of management to eight, including a compensation and benefit reduction of up to 25 percent. ■ Significant Investment in Executive Talent: Of the CEO’s fourteen direct reports, six key roles were replaced externally from 2004 to 2006, including the CFO, head of North America, head of Latin America, and the leaders of Human Resources, Marketing, and Strategy. Five of her other direct reports were in new roles. ■ New Capabilities Were Created: A major effort to source Brand Management, Marketing Analytics, and Supply Chain capabilities was launched, which brought hundreds of new leaders into Avon. THE TALENT CHALLENGE As the turnaround was launched, numerous gaps existed in Avon’s existing talent and in its ability to identify and produce talent. While some of those gaps were due to missing or poorly functioning talent processes, an underlying weakness seemed to lie in the overall approach to managing talent and talent practices. After reviewing Avon’s existing talent practices, the talent management group (TM) identified six overriding weaknesses that hurt their effectiveness. They found that existing talent practices were ■ Opaque: Neither managers nor Associates knew how existing talent practices (that is, performance management, succession planning) worked or what they were intended to do. To the average employee, these processes were a black box. ■ Egalitarian: While the Avon culture reinforced treating every Associate well, this behavior had morphed into treating every Associate in the same way. High performers weren’t enjoying a fundamentally different work experience and low performers weren’t being managed effectively. ■ Complex: The performance management form was ten pages long, and the suc- cession planning process required a full-time employee just to manage the data and assemble thick black binders of information for twice-yearly reviews. 4 Best Practices in Talent Management Complexity existed without commensurate value, and the effectiveness rate of the talent practices was low. ■ Episodic: Employee surveys, talent reviews, development planning, and succes- sion planning, when done at all, were done at a frequency determined by individ- ual managers around the world. ■ Emotional: Decisions on talent movement, promotions, and other key talent activities were often influenced as much by individual knowledge and emotion as by objective facts. ■ Meaningless: No talent practice had “teeth.” HR couldn’t answer the most basic question a manager might ask about talent practices—“What will happen to me if I don’t do this?” EXECUTE ON THE “WHAT,” DIFFERENTIATE WITH “HOW” Our TM group found ourselves in a difficult situation. Fundamental changes were needed in every talent practice, and the practices had to be changed and implemented in time to support the turnaround. This meant that the practices had to be quick to build, easy to use, and, most of all, effective. Taking our guidance from the Top Companies for Leaders study (Effron, Greenslade, & Salob, 2005) and the philosophies of executive coach Marshall Gold- smith (2006), we decided to build our talent practices with two key guiding principles. 1. Execute on the “what.” The Top Companies for Leaders study found that sim- ple, well-executed talent practices dominated at companies that consistently pro- duced great earnings and great leaders. We similarly believed that fundamental talent practices (that is, performance management or succession planning) would deliver the expected results if they were consistently and flawlessly executed. We decided to build talent practices that were easy to implement and a talent management structure that would ensure they were consistently and flawlessly implemented. More importantly, we decided to . . . 2. Differentiate on “how.” While disciplined execution could create a strong foun- dation for success, the six adjectives that described Avon’s current processes were largely responsible for their failure. We drew inspiration from Marshall Goldsmith’s revolutionary recreation of the executive coaching process. He had taken a staid, academic/therapy model for improving leaders and turned it into a simple but powerful process that was proven effective in changing leaders’ behaviors. With those two guiding principles in place, we began a 180-degree transformation of Avon’s talent practices. Avon Products, Inc. 5 FROM OPAQUE TO TRANSPARENT One of the most simple and powerful changes was to bring as much transparency as possible to every talent practice. TM designed new practices and redesigned existing ones using total transparency as the starting point. Transparency was only removed when confidentiality concerns outweighed the benefits of sharing information. The change in Avon’s 360 assessment process was a telling example. The Avon 360 Avon’s 360-degree assessment process was hardly a model of transparency when the turnaround began. When the new TM leader arrived at Avon, he asked for copies of each VP’s 360-degree assessment, with the goal of better understanding any common behavioral strengths and weaknesses. He was told by the 360 administrator in his group that he was not allowed to see them. The TM leader explained that his intent wasn’t to take any action on an individual VP, simply to learn more about his clients. He was again told “no”—that confidentiality prevented their disclosure. While the administrator was correct in withholding the information (the partici- pants had been promised 100 percent confidentiality), the fact that the most critical behavioral information about top leaders was not visible to the TM leader (or anyone else) had to change.